New Hostess IT Centralizes Twinkie Control and Oversight

Reporter

To get Twinkies back on shelves Monday, the new Hostess Brands LLC had to reboot its IT infrastructure.

Last spring, Ben Haines was working as CIO at the Los Angeles-based beer brewer Pabst Brewing Co., when he was asked by the company’s owner, C. Dean Metropoulos, to help reboot Hostess, which he was preparing to purchase. “We had to start everything almost from scratch and have it up and running by July,” said Mr. Haines, who worked as an interim CIO during the ramp-up, and is now CIO at Box Inc. “It blew my mind.”

In just a few months, Mr. Haines had to restart the IT of a company shut for half a year — renegotiating every software contract and relaunching IT systems that would help push 50 million Twinkies into stores this week. “It was a complete startup environment,” he said. Most importantly, Mr. Haines had to reimagine the twice-bankrupted baker’s technology infrastructure to support a leaner operation, that would help the new Hostess survive by better aligning production with customer demand.

Scott Olson/Getty Images

Twinkies will be back in stores on Monday, July 15, 2013

In the old Hostess, separate systems for purchases and ordering meant the maker of Wonder Bread, Ding Dongs and Twinkies and other food products could not rapidly respond to customer demand. Hostess drivers acted as the company’s sales force, taking payments and orders at individual convenience stores, while delivering products. Drivers input those sales and orders through handheld Motorola devices, which sent the data to one of 23 accounting centers. Those centers would aggregate the orders and send them on to the factories.

But the sales and orders recorded in that system were not directly connected to the SAP AG platform that former Hostess executives used to manage cash flow and production. And factory lines had no automated count of products running off the line, Mr. Haines said. “It was done manually,” he said

And since the driver orders did not flow through to depots where they picked up products, the numbers of Wonder Bread loafs or Twinkies assembled on a rack for pickup was often arbitrary. ”He may have ordered 12 loaves, but there are 30 on the rack,” said Rich Seban, the president of the new Hostess, and an executive at the old company for eight years. “He’s still going to take it because that’s what’s on the rack.”

Without real time information on sales, orders or inventory numbers flowing into Hostess, factories often overproduced, and surplus inventory was often lost, said Mr. Seban. “We had a lot of unaccounted for inventory. We had no idea where it went,” Mr. Seban said. Those losses were in the millions of dollars each year, Mr. Seban said.

The International Brotherhood of Teamsters, which represented the baker’s roughly 6,000 drivers before the company was liquidated, says that Hostess always kept tight control over inventory. Workers checked and noted the amount of product at the factories, the depot centers and as it was loaded onto trucks, said Dave Dudas, chairman of Teamsters national bakery and laundry conference for the United States and Canada. “[Drivers] had to account for every piece that was going out and every piece that was coming back in,” Mr. Dudas said.

To help the company better predict customer demand and keep watch over inventory, the IT team scrapped the old handheld routing system, integrating customer orders into an updated SAP system. In the new Hostess, orders, purchases and inventory will flow directly into its enterprise resource planning platform so factories can make production decisions based on real time market demands.

Gone are the days of drivers selling Ding Dongs to small grocery owners. Instead, wholesalers and distributors will call a corporate sales department that will push the order through the centralized platform. “We had to create a customer service department. It was a completely different model,” said Roger Lewis, the new Hostess CFO. “Those orders create the demand at the factory. When you have a centralized process for all the inventory and production system, you can plan across all your factories and you know where everything is going.”

As the system helps push out 50 million Twinkies headed for stores Monday, there are still some kinks, which Mr. Haines says will need to be ironed out over the next six months. For example, one of the company’s factories recently ran out of a flavoring because the SAP component that reorders ingredients had the required amount entered incorrectly, company executives said.

“To get them up and running for July we had to make some assumptions and it will take another six months of fine tuning for it to be truly efficient,” Mr. Haines said. “But with all the craziness it’s amazing it got up and running in such a good time frame.”

Comments (5 of 6)

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11:13 pm July 15, 2013

cicero wrote:

The new Hostess selling a 65 day self life and a smaller cake, when they are questioned about it the point fingers at the management that destroyed the company. Hey Hostess, here is a hint, you don't have to sell old mold tainted cake that is smaller, that is your lone choice. Stop claiming it was some else's idea and take responsibility for your own decisions

4:50 pm July 15, 2013

Karen Wyatt wrote:

Were twenty six days of shelf life, now forty five days? What did they do?

12:41 pm July 14, 2013

healthnut wrote:

"had" to binge and bought the Hostess Chocolate Cupcates that arrived on our grocery shelf. OMG!!! Better than ever! Forget the Twinkies! The union guy said on MSNBC that they expected a large boycott of the products, yeah, right!

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